DATA BASE

WWD: “What impact, if any, do you expect the recent volatility of high tech stocks to have on Internet players’ efforts to finance e-commerce ventures?”
Karl Haller, principal consultant, PricewaterhouseCoopers: “While The Who continue to tour, e-retail could be living out the most memorable line of that band’s signature tune, ‘My Generation’: ‘Hope I die before I get old.’
“And what a strange but fast trip it’s been. It was only 1997 when the term e-retail provoked confusion (Huh? E-retail?) Then, in 1998 and into 1999, largely on the backs of Jeff Bezos and William Shatner, it became the darling of both the media and investment communities (Yeah! E-retail!). But once the hopes and dreams of e-Christmas 1999 faded into the cold harsh reality of 2000, e-retail has been swept aside in favor of the next big things, namely e-markets, e-infrastructure and the next next big thing, B2E, or business-to-employee cyber projects (and remember, you saw it here first).
“Yet, financial reality is setting in. So let’s face facts. Yes, e-retailing is clearly out of favor with investors. Yes, many e-retailers spent way too much marketing their business in a doomed effort to build a brand name. And yes, many of them will cease to exist before the end of the year.
“What’s wrong with that? Shakeouts are a natural and healthy development in the evolution of any industry. As has consistently happened with new, technology-driven industries, the initial explosion of business formation fuels investor interest. Smart money breeds dumb money, which breeds borrowed money, and at some point, cooler heads prevail, and the whole thing collapses on itself like a house of cards. Massive consolidation follows, as many of the newly formed companies go bust.
“That was the case with railroads and automobiles, and more recently, in the biotech sector. In all of those cases, however, the survivors emerged stronger and better able to compete, and the fledgling industry flourished.
“E-retail is following a similar pattern. While it was an overreaction to think e-retail would replace stores — a not-uncommon thought in 1998 — it’s just as much an overreaction to think e-retail will simply fade away.
“Why? Because it’s shopper-centric, and once consumers get a taste of something they like, they’re reluctant to let it go. For many consumers, e-retail, or electronic shopping via any device or medium, is rapidly becoming an integral part of their shopping process.
“And where consumers lead, retailers — and venture funding — will follow. The market’s current skittishness toward B2C ventures will definitely impact e-retail funding, but that is probably a good thing. How many online bookstores, for example, do we really need?
“Our market economy dictates that there will be a balance between money and ideas, and that good ideas will continue to be given ample chance to succeed.”